Table of Contents
- What Is Face Value?
- Key Takeaways
- Understanding Face Value
- Face Value and Bonds
- Face Value and Stock Shares
- Face Value vs. Market Value
- Explain Like I'm Five
- Is Face Value the Same As Par Value?
- What Is the Difference Between Face Value and Market Value?
- What Is the Difference Between Face Value and a Bond’s Price?
- What Is Book Value?
- The Bottom Line
What Is Face Value?
Let me explain face value directly: it's the nominal or dollar value of a security as stated by its issuer. For bonds, this is the amount you'll get paid back at maturity. We often call it 'par value' or just 'par' in bond contexts.
When it comes to stocks, face value is the original cost listed on the stock certificate. In practice, though, the par value of a stock doesn't matter much. Companies set it at a low, arbitrary level, especially in the U.S., because state regulations link incorporation costs to the par value of shares. By keeping par values low, companies cut their fees.
Key Takeaways
You should remember that face value is the nominal value or dollar amount of a security, set by the issuer. For stocks, it's the initial cost on the certificate; for bonds, it's what investors receive at maturity. Importantly, face value isn't the same as market value, which depends on factors like supply and demand.
Understanding Face Value
In bond investing, face value, or par value, is what the bondholder gets at maturity, assuming no default by the issuer. Bonds on the secondary market, however, see prices that fluctuate with interest rates. If rates exceed the bond's coupon rate, it sells at a discount below par. If rates are lower, it sells at a premium above par.
For stocks, face value doesn't indicate real worth—it's not a reliable measure of value. Bonds offer a guaranteed return via face value, but stocks do not.
Face Value and Bonds
A bond's face value is the amount the issuer repays to the bondholder at maturity. The bond might include an interest rate, or profits could come solely from buying it below par and receiving face value later.
Bond par values are usually static, but inflation-linked bonds adjust for inflation over set periods—that's an exception you need to note.
Face Value and Stock Shares
The total face value of a company's shares sets the legal capital it must maintain. Only capital beyond that can go to dividends—it's like a default reserve for protection.
There's no rule on what face value to set, so companies often choose very low ones to minimize reserves. For instance, AT&T shares have a $1 par value, while Apple's is $0.00001.
The Different Kinds of Value in Finance
- Book Value: For stocks, it's assets minus liabilities, showing theoretical share value if liquidated; not applicable to bonds.
- Face Value/Par Value/Nominal Value: For stocks, the given share value, often irrelevant now but historically the initial price; for bonds, the repayment amount at maturity.
- Intrinsic Value: For stocks, an estimate based on fundamentals like earnings; for bonds, present value of future cash flows discounted for risk.
- Market Value: For stocks, current trading price; for bonds, trading price fluctuating with rates and conditions.
- Net Asset Value (NAV): For stocks, total assets minus liabilities, used for funds; relevant for bond funds but not individual bonds.
- Premium/Discount Value: For stocks, trading above or below intrinsic value; for bonds, above or below face value.
- Present Value: For stocks, discounted future cash flows like dividends; for bonds, discounted coupon payments and principal.
- Principal Value: Not applicable to stocks; for bonds, original investment or outstanding amount.
Face Value vs. Market Value
Face value of a stock or bond isn't its market value. Market value comes from supply and demand—what buyers and sellers agree on at the time. Face value and market value might not correlate at all depending on conditions.
In bonds, if interest rates beat the coupon rate, it sells below par. Zero-coupon bonds, with no interest beyond the discount, always sell below par to provide profit.
Explain Like I'm Five
Face value, or par value, is the official price a bond or stock gets from its issuer. For bonds, it's what you get back when it matures. Stocks have low face values because company registration costs tie to that, so they keep it minimal.
But face value often doesn't match market price. Bonds can resell higher or lower based on rates, and stock prices soar above par due to demand.
Is Face Value the Same As Par Value?
Yes, face value is the dollar value at issuance. For bonds, it's what gets paid at maturity, called par value. For stocks, it's the issuer-set price at first issue.
What Is the Difference Between Face Value and Market Value?
Face value is the original issuer price, while market value depends on supply and demand. It can differ hugely—Apple's face value is $0.00001, but market value was $195.27 on May 23, 2025.
What Is the Difference Between Face Value and a Bond’s Price?
Face value is fixed, often $1,000. Price fluctuates with rates, maturity time, and credit rating, leading to trading above or below par.
What Is Book Value?
Book value is a company's assets minus liabilities on the balance sheet. It shows what shareholders would get if everything liquidated, helping assess if a stock is over or undervalued.
The Bottom Line
Face value, or par, is key for bonds as the maturity payout, differing from market value driven by supply and demand. Bonds and stocks can trade away from face value on secondary markets. Historically, it prevented sales below certain prices and set expectations, protecting shareholders and issuers.
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